Weakening of Ringgit: Should we invest locally or abroad ??? (Aug 2015)

In the midst of weakening Ringgit currently, many investors are starting to feel uncertain about their next move. Should we invest locally or abroad going forward? What are the factors that we should consider?

In our opinion, we should go back to the basic of investing by answering these two simple yet mind-challenging questions:

1. What is the type of return are we looking at?
   Yes. All of us knew that we can either go for dividend or capital gain. But, the third type of return comes from foreign exchange gain. Given the same type of investment holdings, the return could be very much different if it was invested in different currency class.
   
   
   
   
2. What's the rule of thumb for placing your money into an investment?
   
   Talking about the rule, it should be very much based on the fundamentals of various asset classes. Profit and loss, P/E ratio, ROI, Equity to Debt ratio and so on... However, sentiment and emotion sometimes clouded our mind, forcing us to forget these fundamentals and succumb to our inner fears. The fear of Ringgit continues to go down and the fears of holding Ringgit still.

After answering these two questions, we hope that investors like you could really have a clearer mind before making your next move. If our investment is based on the fundamentals of a country or region, and we knew that the prospect of it is still bright, should we simply avoid it due to its weakening currency now?

After depreciating so much, do you still think that Ringgit will continue its free fall for a prolonged period? In our opinion, the downside risk for Ringgit is limited going forward, and based on the current valuation of local shares, it becomes attractive once again for bargain hunting. Does investing in local market posing you any currency risk? Definitely NO... (Do you understand?)

What's Boutique Fund Manager ?

Good news to all young and talented fund managers in the country. Securities Commission of Malaysia (SC) further liberalize the capital market by introducing a new category of fund management license recently called "boutique fund management" license.

What's so exciting about it?

Citing encouraging entrepreneurship and competition within the industry, this new license could propel the fund management business to another height. Below table shows the major differences between full-fledged vs boutique fund management firm:

Difference between Full fledged and Boutique fund management frim

What's sophisticated investors?

It's referring to high net worth individuals and high net worth entities. Gross income must have at least RM 300,000 or net tangible assets of RM 3 million excluding own stay property.

Kenanga ASEAN Tactical Total Return Fund

Being a part of ASEAN, we living in Malaysia has seen the growth of the region for the past so many years. Would you like to participate in it? If yes, you should continue read on...

How good is ASEAN ???

ASEAN is a dynamic, fast growing group of economies. The ASEAN nations are committed to regional economic integration by 2015, in the form of the ASEAN Economic Community - a trade bloc that envisions transforming ASEAN into an economic entity with free movement of goods, services, investment and skilled labour, with a freer flow of capital.

Investing in the fund offers investor geographical diversification whilst leveraging on the growth potential of ASEAN as an economic community.

The fund is suitable for investors who are seeking long-term capital growth on the amount invested, who are willing to accept equity risk to obtain potentially higher returns and who want to have investments in the ASEAN region.

What can this fund offering you?

Click here to download the fund prospectus.

Investing in Thailand's Kra Canal project? Let's read first...

It comes to our attention that some of our readers attended an investment seminar recently about this Kra Canal project. What's that actually? Is it another investment scam?

An interesting project...

After a quick check, Kra Canal project was actually mooted by Thailand government long long time ago. It's an interesting idea to build a canal cutting through the narrowest neck of Thailand's southern part. With this canal, ships travelling between China Sea and Indian Ocean could save up to 72 hours sailing time or 1,200km by skipping Peninsula Malaysia and Singapore.

Due to this interesting idea, on and off, many conman like to use back the same old idea as a bait to fetch their victims into believing the viability of the project.

Obviously, the main beneficiary would be Thailand, which can enrich and transform the poorer southern provinces. Other than that, the two of the most populous countries and upcoming economic powerhouse China and India will definitely like the idea which can boost their trading while cutting cost and time between them. That's why it's highly speculated that China is the main investor of the project.

One of the world's busiest port situated in Singapore

The multi-billion ringgit RAPID project at Pengerang, Johor

However, below is the 5 reasons why the project MAY NOT able to take off:

1. Thailand's southern part has been dominated by separatist insurgents over the years.
2. Physiologically, the canal will separates Thailand into two parts, leaving people of the southern part being isolated politically and socially.
3. Environmental issues which could dealt a blow to the area affected and people living there.
4. Political pressure from Singapore and Malaysia governments which are the two most affected countries due to the project. Both countries already poured in billions of USD to build their own world class port facilities as logistic services contributed significant FDI especially Singapore.
5. After all, the saving of 72 hours sailing time is NOT significant enough if compare to Panama Canal and Suez Canal.

After understanding the whole project and its challenges, let's come back to the investment scheme being presented during some seminar recently. Is it viable? Is it true?

True or not, we leave it back to your own judgement.

However, before we make decision, just ask ourselves these 2 questions as below:

• The project needs 10 years time to complete. Would it be the investment horizon that you as an investor would like to consider?
• Since the project is so interesting, why the project still need our small investment, instead of China?

Introducing the all NEW EPF Members Investment Scheme Information Portal (April 2015)

Another very good initiative by the Employee Provident Fund (EPF), a new online portal was launched today to provide the necessary information for all EPF members who conduct their own research and survey on all unit trust funds that were offered under the EPF Members-Investment Scheme (EPF-MIS). Most importantly, it's FREE !!!

The portal named "EPF Members Investment Scheme Information Portal" is managed by an external party and it is accessible as long as the member have an EPF i-Akaun log in.

How to access?

Visit the EPF website here.

Then, you will be directed to the new portal where all of us waiting for...

What's in it for me?

Powered by novagni, the new portal is user friendly and useful for all EPF members...

Fund performances of different funds sorted by different category.
You can only compare the funds within the same category.

You can view the fund info by such as general fund info, transaction info, and statistic of the funds including the history of distributions...

Different funds comparison of up to a maximum of 4 funds at one shot...

Honestly, we should give the EPF a thumbs up for this. The initiative taken to have the i-Akaun log in was amazing few years back. Coupled with this new portal for all i-Akaun users is an extra milestone for other government related agencies to follow. Let's give EPF a "Like" here and "Share" it out all Malaysian as an encouragement to EPF...

To read the FAQs about the new portal, please click here.

Source: EPF website

RM500 PRS Youth Incentive. What's that and How to Grab it?

While most of us already know what is Private Retirement Scheme (PRS), how about the RM500 PRS Youth Incentive? If you never heard of, you should understand it before regretting. If you already heard of, have you grab it? If no action taken yet, why?

Unveiling the BEST investment in Malaysia...

Announced during the 2014 National Budget by our Prime Minister last year, in order to encourage more youngsters to kick start their retirement savings via PRS, a one-off RM500 incentive will be given to them. We have compiled some questions posted to us and get the answers from Alex Yeoh, a licensed financial planner and corporate PRS adviser:

1. What is PRS youth incentive?
   It's a one-off RM500 incentive if you fulfilled the following criteria:-
   ~ Malaysian
   ~ Participating in the PRS Scheme from 2014 to 2018
   ~ Minimum RM1,000 is made within a calendar year
   ~ Aged between 20 to 30 years old when contribution is made
   
   
   
   
2. Who can qualify for this PRS youth incentive?
   Malaysians who are aged between 20 to 30 years old (have not reached the 31st birthday) when the contribution is made.
   
   
3. The minimum investment of RM1,000 must be made one-off ?
   No. You can accumulate it within any calendar year between 2014 to 2018 in a SINGLE PRS fund, provided that your age is still eligible to do so.
   
   
4. My employer does contributing to my PRS account also. Can it be counted to get the incentive?
   No. The minimum of RM1,000 contribution must be from individual level.
   
   
5. Do I have to apply for the incentive?
   No. It's automatically done by PPA and PRS providers. They will monitor the eligible accounts, compile a listing of those qualified and notify the relevant government department for the incentive.
   
   
6. How do I receive the RM500 incentive?
   It will not given directly to you. Instead, it will be credited into your PRS sub-account A of the qualified PRS fund. Then, it will be converted into units of that fund.
   
   
   
7. How often the RM500 incentive will be paid?
   Payment will be made on a bi-annual basis and PPA expects to receive and process the pay-out within 3 months from the cut off date of 30th June and 31st December. Example, if you contributed RM1,000 by December 2014, the RM500 incentive will be credited into your PRS account by March 2015.
   
   
8. If I contributed RM1,000 each year in 2014 and 2015, how much incentive can I get?
   The incentive is on a one-off basis. Meaning each eligible contributor can only get the RM500 incentive ONCE in their lifetime.
   
   
9. Since the eligible period is until year 2018, why should I start now?
   You can start late. The different is you will get the RM500 incentive late also. In order to let your money grow with compounded return, is it better to start early? Definitely earlier is better...
   
   
10. Any advice to our readers here?
    Alex Yeoh: "The incentive makes PRS even more attractive now on top of the tax relief (up to RM3,000 per year) being given. My advice to you is to grab it while you are still eligible. Not everyone can get it, and worst still some of you knew this thing late and missed out. With 50% guaranteed return if you invest with a minimum of RM1,000, was there any better investment?"

With this, Finance Malaysia hope the above explanation could help readers to understand more and share it to your friends, especially those approaching 31st birthday. Once again, we like to thanks Alex Yeoh for his valuable input. You may contact him via email alexyeoh@vka.com.my for more info. Thanks.

Understanding "Special Purpose Acquisition Company" (SPAC). Is it Purely Speculative?

After almost 3 years since the listing of Malaysia's first special purpose acquisition company (SPAC) on Bursa Malaysia, many investors still don't know what's that and many investors skeptical about its existence. Let's us explore here...

What's SPAC ?

It's another product of Bursa Malaysia, which is very different from other trading companies or products on the stock exchange. Before investing into a company, what do we consider first? Company profits track record? Business model? Earnings growth projections? P/E ratio?... All of these info is UNAVAILABLE for SPACs during initial public offering (IPO).

In fact, a SPAC is floated without any business. It's up to the management to identify a suitable acquisition or merger (or more), and to secure shareholder approval to use IPO proceeds to pay for that deal. In Malaysia, a SPAC must complete at least a deal within 3 years after listing.

Without all those info, what could investors relying to? Obviously, the only visible reference was their management team. The success of a SPAC depends solely on the management team, which basically comprise of experience or expertise people to conclude a deal.

Then, this is very risky. Correct?

Undeniably, it's riskier than ordinary IPO investment. In order to safeguard investors interest and providing them some comfort, SC guidelines stated the following 2 key rules for SPAC:

1. 90% of the IPO proceeds raised must be placed into a trust account, and
2. If the SPAC fails to make a deal after the 3 years deadline, it will be liquidated and the trust money will be distributed to shareholders.

So, is it worth to invest in?

Yup. SPAC was very much like a speculative investing, without any fundamentals of a proper business in place. It solely depends on the management team to make it or break it. With the 3 year deadline, this puts SPAC in a dire needs to conclude a deal than the seller. This may adversely affecting the negotiation power of SPAC. Do you think that the deal negotiated in such manner could bring advantages to shareholder? Let's wait and see...

YSLM was another Pyramid Scheme? How it Works?

It was so hot that it appeared in major daily newspaper recently on this YSLM scheme. After a brief checked on it, there are a few funny facts that come across Finance Malaysia mind. For a mere RM300, anyone can start to jump into this so-called business (business of get conned and conning people?).

Let's have a read below:

1. The "Future Richest Person in the World" !!!
   This would be one of the funniest advertisement in the world. Yes. The founder successfully garner the interest of public and now the authorities as well. Lol. Although he may not become the richest person, he already become the "shameless" person, at least, in Malaysia currently. How to describe him? Brave or over-confident? Did anyone seen Li Ka Shing called himself the "future" richest Chinese before he really achieve it?
   
   
2. People or Product oriented scheme?
   For RM300, you can join them as member and every member he recruits, he will be paid RM50 per person until the 6th level. Beyond the 6th level, the member will have to top up his membership fee to a maximum of RM30,000 to continue enjoying the benefits. Any products involved here? NO... It's all about recruiting people and you got the rewards. This is the fundamental of pyramid scheme !!!
   
   
3. BMWs and Cash within a short period?
   If cash money doesn't attractive to you, then how about BMWs? This is the tactic used to lure investors simply for 2 reasons. Once a member joined the scheme, within a short period, he/she may get a BMW (depending on how many people he/she successfully conned into the scheme). With this luxury car, it will create a huge effects implicating that the scheme was actually works and many people joined are making big bucks.
   
   

So, how does it works actually?

Please refer to diagram below:

Anyway, the said scheme already banned in China. Local authorities is going to take down all the billboards. And, where is the founder?

New Fund: HWANG SELECT JAPAN QUANTUM

Did you missed out on the bull run of Japan market last year? Can't find any pure Japan fund in local unit trust funds? You no need to wait anymore with HwangIM launching the 1st Japan Fund in the market for investors to get exposure to pure Japanese market.

The Hwang Select Japan Quantum Fund is an equity fund that seeks to provide capital appreciation over the medium to long term period. It invests in undervalued Japanese companies with growth potential.

3 Reasons Why this Fund ?

1. Growth Opportunities from the Return of the Samurai, with "Abenomics"
   
   
   
   
   
   
   
   
2. Catalysts (Improving Business Environment and Employment Rate, Tokyo Olympics 2020)
   
   
   
   
   
   
   
   
3. Strength and Knowledge of NIKKO AM

After in  sleeping mode for more than 2 decades, Japan is waking up again to become ultimate rising sun country of the world. If you think that Japan's future is still promising for the next few years, you may consider to diversify into this fund.

Source: HwangIM

Click here to download prospectus

Top 3 Common Investing Mistakes

When coming to investing, do you wonder why retail investors always lose out? What are the common mistakes they made? In this article, Finance Malaysia blog pointed out the top 3 investing mistakes by retail investors.

The 3 common mistakes:

1. Trying to time the market.
   "Every often, investors thought that they can forecast the short-term direction of share market, or listen to other people (market timers). It's a big mistake. It was like a gamble, guessing the ups and downs. Can you see a gambler become millionaire?"
   
   
2. Being an active trader.
   "Buying blue-chip counters with long-term profits as a goal is the real way of investing. Don't trade actively which can resulting your goal being blurred along the way."
   
   
3. Using those high cost investing tools.
   "Every single penny you saved contributes to the total returns you gained from an investment. Investors should avoid those high charges investing tools to optimise their return. Can you guaranteed the company that charged higher perform better?"

Happy Investing !!!

Lesser Amount can be Withdrawn for EPF Members Investment Scheme effective January 2014

Are you an EPF member who withdraw money out for investment scheme? Then, this is a very important news to you.

Effective January 2014, the minimum basic savings required in Account 1 was revised upward. This will affect all of YOU who withdrawn certain amount from EPF account 1 for eligible investment purpose. Higher limit means lesser money you can withdraw from EPF in the future.

How much will be increased?

Based on the chart below, the percentage increased can be as high as 64%. Generally, the increasing amount was at least 50% once you're age 27 onward.

How to calculate how much can I withdrawn from EPF account 1?

What's the different or impact?

Depending on your age and how much savings in account 1, the impact varies by members. For better explanation, please see example below:

Finance Malaysia hopes this post can enlighten you on EPF members investment scheme withdrawal. You may share this to your friends. Thanks.

TA 2013 Malaysia Outlook: Ride the Volatility

By TA Securities,

We believe 1H13 will be a choppy period and election concerns could drag down the FBM KLCI by 8% to 10% in the period before market rebounds in the 2H13. The impetus for revival will mainly hinge on the end of election overhang and strong domestic demand.

Sustained monetary easing on the back of low inflationary pressure and attempts to reduce budget deficits by cutting subsidies and channeling the savings to productive ventures are positive despite the short-term impact on earnings. Overall, domestic economy will play an integral role in sustaining confidence in domestic equities next year in the absence of any overwhelming micro drivers.

Corporate earnings for 9M12 were less robust and we forecast full year earnings growth for the FBM KLCI to be 9.4% only. Chances of a strong revival in the immediate-term are minimal based on external sentiment and dwindling demand in key export markets. Our earnings growth forecast of 8% and 8.4% for CY13 and CY14 is not compelling vis-a-vis key regional emerging market's 16.1% and 14.7% respectively. It could come under further pressure if the implementation of minimum wages had greater impact in raising the input cost than the intended increase in disposable income and spending. High likelihood of subsidy cuts (electricity tariff and fuel price increases) post 13th General Election would be negative on earnings and will prompt us to trim our CY13 and CY14 forecasts by 1.2% and 4.9% respectively.

How about Foreign Markets?

External factors will continue to dictate the market directions. The structural flaws cannot be undone overnight but expect bouts of positive improvements to kick in the 2H13 as fats are trimmed and jobs created. China could revive its domestic growth without stoking inflationary pressure but it can be destabilizing factor if its row with Japan escalates. The same applies to Iran and the West.

Can KLCI end Strong this year?

We derived our end-2013 target of 1,710 for FBM KLCI after applying 2008-2011 average forward PER of 14.3x on mid-cycle EPF of 120 sen. The underlying key assumption is that BN will return to power with slim majority. This target is a 5% discount to our bottom-up valuation of 1,800.

FBM KLCI performance before and after 2008 Malaysia's election

Strategy...

Sell-on-strength, especially overvalued defensive plays in the Consumer, Healthcare and Telco sectors and turn cash-heavy to accumulate high beta plays in domestic sectors, which are mainly related to Construction, Oil & Gas and Property sectors, in 1H13. Banking sector holds good buys based on their attractive valuation, still robust loan growth and bright chances of benefiting from ongoing domestic expansions.

Source: TA securities report

Is it SAFE to Invest in Private Retirement Scheme (PRS) ?

This is one of the common question asked by potential PRS contributors. First, I want to emphasis that PRS is a long-term investment for the purpose of retirement planning. In investment case, long-term means you already using the most powerful method to reap a good return. Anyway, many contributors still want to treat PRS as some kind of short-term investment. I got the answer for you.

Basically, PRS is very similar to unit trust investment. The underlying structure and investment philosophy were the same actually. No wonder many people perceived PRS is another unit trust scheme. Yes, you're correct to a certain extent.

Under the guidelines, each PRS providers must at least launched their core funds for investors to select, namely Growth, Moderate and Conservative. To make things simple, we only discussed these core funds because I believe most of us only invest in core funds. From these core funds, growth fund is the most aggressive one. In other words, the most risky one, with the aim of getting better return than the other two.

Asset Allocation of Core Funds under the guideline by Securities Commission of Malaysia

Is it really so risky?

Let's us examine even deeper now. Again, under the guideline for PRS growth fund, only maximum of 70% of NAV can be allocated to equities, while the balance was in fixed income/money market instruments. If you're an unit trust investor, you will know that this is almost like a balance fund type of asset allocation. For your information, for normal unit trust equity fund, equities exposure was between 70% - 98%. Meaning, the maximum equities exposure for PRS Growth fund equals to the minimum of an equity fund. Not so risky, right?

Of course, if you want higher equity exposure for your PRS portfolio, you can opt for those non-core funds, which can go as high as 98% in equity exposure. Then, the next question was "Is it risky to invest now?"...

It all depends on your perception. If you think that Malaysia market is too expensive now, you may opt for those funds with foreign exposure. Currently, from the 4 PRS providers whom already launched their schemes, some can invest into foreign countries. Some are fund-of-funds, some are foreign funds. Coming soon, more variety of PRS funds will be offered, such as property fund, commodities fund...

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom representing multiple PRS providers. Thank you.

What are the TAX benefits from Private Retirement Scheme (PRS)?

According to Securities Commission of Malaysia, tax incentives are provided to both employers and individuals for the first 10 years from assessment year 2012; in addition to the tax deduction permitted for EPF contributions:

Amount of Tax Savings by individuals for PRS contributions

For Individual:

Tax relief of up to RM3,000 per year will be given for contributions made within that year. This is on top of existing tax relief already enjoyed by taxpayers. How much can you save from tax? Let's look at the table above which illustrates the amount of tax saving an individual get after personal tax relief and RM6,000 EPF + Life Insurance tax relief. Assuming maximum RM3,000 PRS relief, the amount of tax saving depends on your level of income. For high tax bracket individual, you can save up to RM780 annually!!!

For Employer:

Tax deduction on contributions to PRS made on behalf of their employees above the statutory rate of up to 19% of employees' remuneration was granted. Example, if an employer already making 12% EPF contributions to his employees, the employer may choose to reward their employees by contributing into employees PRS account for up to another 7%.

Vesting Schedule to Retain Employees?

Yes, employer can use PRS as a tool to retain employees by adding a "vesting schedule" clause. Currently, there are a few available vesting methods: by length of service, job rank, or by age. Unlike EPF, if an employee leaves before vesting, the employer can access to the un-vested portion of contribution already made. Likewise, for EPF, employee take the full amount when they left. With PRS vesting schedule, employee may think twice before switching jobs.

In conclusion, there are tax incentives for every tax payer, employee or employer. Ultimately, enough retirement funds was the key objective of PRS. On top of that, a tax exemption is also provided on income received by the funds under the PRS.

This is a guest post by Alex Yeoh in the series of Private Retirement Scheme. For more PRS info, you may contact Alex Yeoh (alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.

How Private Retirement Scheme (PRS) works actually?

Many people are still in the dark on how actually Private Retirement Scheme (PRS) works. In order to clear everyone's mind, we hope this post was timely for those who may want to entitle for extra tax relief of up to RM 3,000 given by PRS before 31st December 2012. To further explain the whole scheme, Finance Malaysia Blog was glad that Alex Yeoh, a licensed financial planner is able to share with us on this matter.

By Alex Yeoh,

First we must know that PRS is a voluntary scheme for the purpose of retirement saving. For ease of understanding, let us look at the picture above which explain the process into two parts. Initially, contributions were made by us into the PRS fund that we select. It was as flexible as  normal unit trust investments (shown in upper part). Contribute anytime any amount as you like, without any specific intervals. As simple as that.

When can I withdraw the money?

Each time, your contributions were split and maintained in sub-accounts A and B similar to EPF way (shown in lower part). 70% of contributions will go to Account A, which can be withdrawn upon reaching retirement age, which is currently at 55.

Meanwhile, the balance 30% into Account B, which can be withdrawn after one year, subject to 8% tax penalty. Take note that you can withdrawn from Account B for whatever reason. Although lump sum withdrawal are permitted, contributors are encouraged to retain their savings for continuous investment under the respective schemes.

Why 8% tax penalty?

The said 8% tax penalty was to discourage contributors to withdrawn their money prior to retirement age. We must understand that PRS is meant for retirement savings. Moreover, the 8% tax penalty was deducted from withdrawal amount to pay back Inland Revenue Board (IRB). Why? Because IRB is the one who gave you tax relief on contributions made initially. Otherwise, loop-hole was existed with everyone just want to take advantage of the tax relief and  withdrawn their money after that. Agree?

For more PRS info, you may contact Alex Yeoh (email: alexyeoh@vka.com.my), a licensed financial planner, whom can distributes products from multiple PRS providers. Thank you.